Yahoo Finance EU urges British banks to relocate to avoid no-deal 'catastrophe'
The European Commission has told British banks and insurances firms they should relocate to the continent if they want to avoid what its president, Jean-Claude Juncker, called a no-deal “catastrophe.”
The commission published emergency legislation on Wednesday designed to limit the impact of an increasingly likely no-deal scenario.
Juncker said: “The risks of a disorderly exit of Great Britain from the EU are obvious. It will be an absolute catastrophe. Therefore the Commission as well as the member states are trying to prevent this disorderly exit from the union, but it takes two to tango decently.”
The plan includes a 12-month extension to existing arrangements for London-based clearing houses – a move which was welcomed as “vital clarity” for the City of London.
“The area we identified as problematic from a financial stability point of view has to do with derivatives and this is why we are today recognising as equivalent the central clearing party in the UK, which means EU operators will be able to continue to use clearing services in the UK for a period of 12 months,” a senior EU official said.
However, the reprieve was designed only go give businesses time to move from London.
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“Services will have to migrate to the continent and we need time for that,” the source said. “Our assessment is it will take around 12 moths to happen.”
The commission has also changed regulations on derivatives trading to allow for a “smoother transition of contracts from the UK to the EU,” said its vice-president Valdis Dombrovskis.
An official commission document added: “Financial institutions that wish to provide banking or insurance services in the European Union should take all necessary steps to be properly authorised on withdrawal date, including by establishing presence in the EU27.”
It also warned the contingency measures put in place “cannot offset some of the costs created by the application of two separate regulatory and supervisory frameworks.”
It is the latest in a long line of efforts to use Brexit to lure lucrative financial services from London to EU hubs in Paris, Frankfurt and Amsterdam.
The Bank of England estimates that 5,000 financial services jobs will go to the continent after Brexit, a figure backed by financial services minister John Glen. The losses could be even worse in a no-deal situation.
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